Global Warming and Secular Stagnation

As the world prepares for another round of climate negotiations, it is worth repeating a few simple points. First, it is becoming increasingly obvious that the world is already paying a substantial price for global warming.

Extreme weather events will never come with a stamp that says “caused by global warming.” We know that global warming will change weather patterns in ways that are not entirely predictable. That means that we will see unusual weather events where global warming was likely a factor, but we can never know for certain.

One of the leading candidates in this respect is the extreme drought that afflicted Syria in the last decade, destroying much of its agriculture and leading to a mass migration to its cities. This migration was likely a factor in the unrest that had led the country’s civil war. Syria’s civil war in turn has led to hundreds of thousands of deaths, the displacement of millions, and of course the rise of ISIS.

It is likely that we will see, or are already seeing, other weather disruptions with comparable human consequences. Unfortunately, there has been much attention to low-lying and relatively sparsely populated islands as the main victims of global warming. In fact, there will almost certainly be hundreds of times more victims in relatively densely populated areas facing droughts or countries like Bangladesh, which could be hit by devastating floods.

The time has long since passed when we should be arguing about whether global warming is happening or whether the consequences will be serious. The question is what we are prepared to do about it. Here also, we have seen reality largely turned on its head.

Most countries are still suffering from the fallout from the Great Recession. They are struggling to contain budget deficits even as their economies remain well below full employment. This creates a situation where the leaders planning to meet in Paris are looking to address climate change with the coins in their back pocket.

This logic is 100 percent backwards. The economic problem that the United States, most of Europe, Japan, and even China now face is secular stagnation. This is a prolonged period of inadequate demand. The constraint on further output in all of these places is not the limit of the economy’s ability to produce goods and services, the limit is the demand for goods and services.

This is a problem for which measures to confront climate change is an obvious solution. We know that reducing greenhouse gases (GHG) to acceptable levels is a massive undertaking. It will take an enormous amount of capital and labor to make our homes and businesses more energy efficient, and to convert them to clean sources of energy as quickly as possible. The same applies to our transportation network, as we have to promote mass transit and make all of our transportation vehicles cleaner.

This can be done, but it costs money. But the story that is missed is that secular stagnation means we have the money. The resources are the unemployed and underemployed workers who could be employed in this massive undertaking. In terms of money, contrary to the whining of the deficit hawks, there are no practical limits to how much the United States, Europe, and Japan can borrow right now. We hit limits on our ability to borrow when the economy is near full employment, not when there are still large numbers of unemployed workers.

It’s not necessary to take my word on this issue. The financial markets are saying the same thing. Long-term interest rates in the United States remain at extraordinarily low levels. The major European countries face long-term interest rates of less than 1.0 percent. And that debt-ridden basket case Japan has to pay an exorbitant 0.3 percent on its long-term debt. These markets are telling us that we can borrow hundreds of billions more each year to address global warming or other major needs.

There is one other point that is worth noting in this context. We should want to reduce GHG emissions at the lowest possible cost. Since it doesn’t matter for the environment whether the GHG comes from the U.S. or India, it would make sense to reduce emissions in the places where we get the greatest reductions per dollar.

That would mean having the U.S. and other wealthy countries pay developing countries to reduce their GHG emissions. We should be paying for India and other developing countries to build out a modern electric grid that is based on clean energy. That would be enormously beneficial to these countries, since they desperately need more energy, but it would also be beneficial to the wealthy countries since we could avoid an enormous amount of coal usage. And, paying India to develop clean energy should even help create jobs in the U.S., although the route is a bit circuitous.

Anyhow, this would be an obvious case where we could do something that would be very good for people in the developing world and for the U.S. economy today, and hugely important for all of our children and grandchildren in the years to come. Unfortunately, when we have a Congress controlled by people who don’t know the earth is round or whether global warming is happening because they are not scientists, we may not make much progress along these lines.

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And the answer is… “set targets.” As long as adopting shorter work weeks and years to achieve full employment is off the agenda, doing something meaningful about climate change is also off the agenda. Shorter hours is not a panacea for full employment or slowing man-made climate change. But excluding shorter hours from the policy mix is the opposite of a panacea — guaranteed toxic.

It is no mistake that shorter hours are off the agenda. It is not happenstance or serendipity. The best way to describe the thinking behind the exclusion is a kind of rentiers’ marxism-in-reverse. Marx’s model of capitalism predicts an “increasing organic composition” of capital. In the absence of capital devaluing crises, such an increase makes labor increasingly scarce relative to capital. Shorter hours would make labor even scarcer relative to capital. Price of labor goes up, returns to capital go down. Can’t let that happen. This is America, where “free enterprise” rules and the rich buy the policy regime — and the policy rationale — that suits them.

So achieving full employment and mitigating climate change are off the respectable economists’ agenda. The question is what are we prepared to do about that.

Tom, check. Full underutilization and marginalization of the labor of the working class bottom 80-90% is the requisite objective the hyper-financialized, rentier-socialist corporate-state. Saying so in public is decidedly maladjusted, non-bourgeois and won’t get one invited to holiday parties.

Translation: Since the end of the Maunder Minimum, and later the onset of the Fossil Fuel Epoch and Industrial Revolution, human apes have been f$&king and consuming resources per capita at an increasingly unsustainable, mass-suicidal rate.

The thermodynamic, ecological bill has come due since 2000 to 2005-08 (since the 1970s in the US), and our collective exergetic/entropic account is overdrawn.

“The economic problem that the United States, most of Europe, Japan, and even China now face is secular stagnation. This is a prolonged period of inadequate demand. The constraint on further output in all of these places is not the limit of the economy’s ability to produce goods and services, the limit is the demand for goods and services.”

Where is the disconnect between noticing the demand for goods and service is insufficient to overcome secular stagnation impeding growth and pegging past growth as overshooting planetary limits to a world economy that requires 1.5 Earths?

The actual limit is the capitalist system requires a free lunch appropriated by military might and paid for by working people and wanton pollution. The free lunch for corporatism has turned into friction from Earth that translates to a speech on secular stagnation at a business luncheon.

It always sounds nice to have enlightened governments borrow money to do good and green things yet actual reality is quite different. The US, for example, borrows money to avoid pinching taxpayers for endless war and its huge associated profit streams. What government anywhere borrows money and doesn’t put it into military crapola paid for with austerity for ordinary citizens? Somebody, please name one.

“In terms of money, contrary to the whining of the deficit hawks, there are no practical limits to how much the United States, Europe, and Japan can borrow right now.”

Why should the U.S. or Japan “borrow” (the euro raises problems in the case of European states)? Given their monetary sovereignty, they can ISSUE the money needed to address climate change and other problems–without creating debts for themselves.

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